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$25M Judgment Against Pilgrim's Pride Overturned

By Brett Snider, Esq. | Last updated on

Pilgrim's Pride won't have to shell out $25 million to Texas, Arkansas, and Louisiana chicken growers after the Fifth Circuit overturned the lower court's ruling that declared the corporation closed down some of its operations in an attempt to manipulate prices.

The Texas-founded poultry corporation, Pilgrim's Pride Corporation (PPC), closed some of its chicken processing plants in 2009 due to an unexpected overproduction of chicken which was driving prices down, but this shift caused chicken growers to lose tens of millions of dollars, reports The Dallas Morning News.

What convinced the Court that PPC wasn't illegally playing the market?

Pilgrim's Pride Shutters Production

PPC is one of the world's largest chicken producers, but the company was forced to idle some of its operations in 2009, including a poultry processing plant in El Dorado, Arkansas after filing for bankruptcy protection in December 2008, reports Reuters.

The beef -- or in this case, chicken -- the farmers had with PPC is that they believed the corporation violated federal antitrust laws by responding to the changes in the market and slowing production.

Amongst the chicken farmers' statutory arsenal is the Packers & Stockyards Act (PSA), a 92-year-old law that regulates interstate commerce and prevents price manipulation or control of poultry or other livestock markets.

PSA was signed by President Warren Harding -- yes, he was a president -- and much of the arguments before the Fifth Circuit involved whether to interpret the legislation as only forbidding price manipulation that was "anti-competitive" or any changing of prices.

Decision to Reduce Was Legit

The Court had a prior PPC case to refer to, Wheeler v. Pilgrim's Pride, in which the Fifth Circuit had opined that "an anti-competitive effect" is a necessary requirement for any claim under PSA.

Turning to U.S. Supreme Court precedent, the Fifth noted that "anti-competitive conduct" could be described as actions which are "likely to suppress or destroy competition," and not something less.

Since the Court didn't have sufficient evidence of intent to fix prices or screw its competition -- actually more evidence of a company struggling to recover -- the Court affirmed that a PPC could legally regulate its own supply in order to raise prices.

PPC wasn't playing Chicken Little in order to drive prices up for nefarious reasons, it was doing so to recover from its inadvertent overproduction, which the Court found to be finger-lickingly legit.

Bottom Line

Laws like PSA or antitrust laws are meant to protect competition, not low prices, and sometimes suppliers are hurt by completely legal pricing maneuvers.

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